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David Sharp Address 2017

Our former President and inaugural David Sharp Orator Dr Michael James has provided a text of his speech delivered on 31st October 2017 at Cafe Boheme.

The pdf is to be found HERE and the text can be viewed online ‘below the fold’

ADAM
SMITH CLUB

DAVID
SHARP ADDRESS, 31 OCTOBER 2017

Can
the European Union Survive?

Michael
James

It’s
a great pleasure to be addressing the Adam Smith Club again after a
long absence. And it’s a special honour to be giving the first
address in memory of our founding president, David Sharp. I first
got to know David in the late 1970s. At that time I was busy
acquainting myself with the classical liberal tradition, which was
much less well-known then than it is today. I soon realised that
David was a true authority on classical liberalism; not only was he
familiar with the literature of that tradition but he could apply its
insights to public issues often in original and even surprising ways,
opening up new and intriguing perspectives. And he did so in a
characteristically gentle and persuasive manner.

The
European Union has been a topic of growing interest to me over a
number of years. Britain’s first referendum on membership of what
was then called the European Economic Community took place in 1975.
By then we’d come to live in Australia but had I been able to vote
I would have been among the two-thirds of voters who wanted Britain
to stay in. I shared the general view that the European Community
was essentially about free trade. True, it protected and subsidised
agriculture, so Britain had had to restore its corn laws – and it
was the repeal of the corn laws in 1846 that began the great
expansion of free trade in the nineteenth century. But Britain in the
1970s was an economic basket case and the European continent was
booming.

Then
in the 1980s came the Thatcher revolution and the British economy
recovered. But the European Community had little directly to do with
that recovery, and it started to become clear that it was set on
expanding from a free trade association into a European super-state
with no principled limits on its powers. In 1988 Margaret Thatcher
made a famous speech in which she said:

We
have not successfully rolled back the frontiers of the state in
Britain, only to see them re-imposed at a European level with a
European super-state exercising a new dominance from Brussels.

That
speech sowed the seed of the movement to take Britain out of the
European Union.

Around
the same time Britain’s Labour Party, which had hitherto opposed
the European Community as a capitalist club, came to the same
conclusion: that in fact it could entrench the powers of the state
and act as a back-door counter to Thatcherism. From then on, as the
European Community steadily expanded its powers, Britain’s
establishment liked it more and more. Opposition to it at Westminster
was almost wholly confined to a wing of the Conservative Party which,
however, steadily grew in size and influence. It eventually got its
way when the Conservative Prime Minister, David Cameron, agreed to
hold in 2016 an in–out referendum on Britain’s membership of what
by then had become known as the European Union. He did so believing,
like almost everyone else, that the Remain camp, which he supported,
would win.

As
the referendum approached, the components of the establishment took
turns in a transparently orchestrated campaign to forecast disaster
if the UK left the European Union: the main political parties, most
government ministers, the Treasury, big business, the trade unions,
the armed forces, the Church of England, and the professions,
including academia and even actors and arts administrators. They
were joined by international economic organisations like the IMF and
the OECD. Even US President Obama, during a visit to Britain, warned
that if Britain left the EU and sought a free-trade agreement with
the US, it would have to go, in his words, to the ‘back of the
queue’. His use of the UK English word ‘queue’ in place of the
usual equivalent American word ‘line’ created a strong suspicion
that his British hosts had handed him the script and thus recruited
him into their campaign against Brexit.

The
surprise victory of the Leave camp revealed a gulf of disbelief and
distrust between the elites and the people at large. That disbelief
instantly turned out to be fully justified: the Treasury had warned
that a Leave vote would be followed immediately by a recession and a
horror budget, but in the event the economy performed slightly better
after the referendum than before, and is still performing quite well.
But neither that nor the referendum result itself has undermined the
establishment’s peculiarly near-unanimous pro-EU mindset. After
all, elites believe that they’re entitled to get their way and
won’t readily take no for an answer. And, of course, many of them
would be in receipt of substantial EU subsidies; and when subsidies
are threatened they can speak with impressive eloquence.

This
continuing elite consensus favouring EU membership is one reason
Britain’s negotiations to leave the EU seem so slow and confused,
since it sustains the hope that Brexit can be somehow reversed or
fudged with a second referendum or a kind of associate membership or
parallel regime. Another reason is that the European Union is trying
to ensure that Britain is worse off outside the EU than it ever was
as a member; as the President of the European Commission, Jean-Claude
Juncker, has decreed, ‘Brexit cannot be a success’. The EU is
terrified that Brexit will be a success, since other member states
might then be tempted to emulate it. But if the EU does lose more
members, the trigger is likely to be the EU’s single currency, the
euro, which has proved to be an extraordinary burden for several
bailed-out member states and a disaster and a tragedy for Greece. If
the European Union does solve the problems caused by the euro it
could well survive in its present form. But I believe that to solve
those problems it must rethink its entire rationale and purpose, and
there’s no sign of that. But unless the EU can reform itself,
events will most likely in due course impose the necessary changes in
a potentially destabilising manner.

The
Motives for a European Association

The
official case for the European Union is that it was born out of the
ruins of Europe after two world wars and has been mainly responsible
for keeping Europe peaceful ever since. However, in my judgement the
long peace in Europe since 1945 is mainly due to two other factors.
First, with the onset of the cold war NATO was set up and American
troops were stationed permanently in Europe. Second, Germany
accepted that it really had been defeated (as it hadn’t done at the
end of World War I in 1918) and completely and permanently renounced
its imperialist goals – although that didn’t become fully clear
until the 1970s. So I don’t believe that Europe does face a stark
choice between the existing European Union and a return to the
national rivalries and conflicts of the early twentieth century.
Indeed, the European Union has itself generated internal tensions and
hostilities by its steady transfer of powers from the member states
to the union. The great paradox of the European Union is that it has
tried to unify Europe with uniform regulations and institutions, but
these have instead generated disunion between the member states.
Above all, the monetary union introduced at the end of the last
century has sharply divided Europe between debtor and creditor
nations, and now threatens the integrity of the EU. Any European
association that succeeded the European Union would have to return
some powers to the member states and would have to abandon or reform
the single currency.

And
yet many of the motives that prompted the nations of Europe to form
or join the union would survive any break-up of the present union.
The Germans, for obvious reasons, would still feel their history to
be a burden and would be keen to be good Europeans. France also
feels the burden of Germany’s history and so would always seek to
cooperate closely with its powerful neighbour; it’s hard to imagine
France and Germany ever ending the treaty of friendship which they
signed in 1963. The Italians would still believe they were not much
good at self-government and would welcome any outside help they could
get. Greece, Spain and Portugal have within living memory been
military dictatorships, and they would still welcome the additional
legitimacy their young democratic systems derive from a European
association. The east European countries would still want to offset
the influence of their big Russian neighbour by strengthening their
ties with western Europe. The small European countries would still
appreciate the status they derive from being actors on a continental
stage on largely equal terms with their big neighbours. Even Britain
would be happy to join a European association that focused on
economic cooperation and minimised any loss of political sovereignty.
So if the European Union were to break up it would most likely
eventually be replaced with another continental association, rather
than reverting to the aggressive nationalism of the early twentieth
century.

This
point is worth stressing because many people throughout Europe
genuinely and deeply valued Britain’s membership of the European
Union, and for them Brexit has been a profound shock. The achievement
of European unity has seemed like a miracle after the multiple
tragedies that Europe experienced in the first half of the twentieth
century. My own hope is that Brexit will help to preserve European
unity by triggering the necessary reform of what I think is a
dysfunctional and counterproductive set of institutions.

Three
Big Facts about the European Union

So
much by way of setting the scene. To understand why the EU may not
survive, it’s necessary first to appreciate exactly what it is. It
can be summed up in three big facts. First, the European Union is a
unique set of institutions that formally came into existence in 1957
when the original six member states signed the Treaty of Rome. But
this treaty didn’t set up agencies of cooperation between the
countries, as free trade associations do. Instead it set up governing
institutions that stand above the member states and amount to what
Margaret Thatcher in 1988 called, as we saw, a ‘super-state’ in
the making. In the political science jargon, the EU is not
‘intergovernmental’ but ‘supranational’. It’s a remarkably
complete state-like system. It has a wide network of foreign
embassies and delegations. It has a flag, and it has an anthem,
drawn from Beethoven’s Choral
Symphony.
Its institutions are strikingly undemocratic. The only directly
elected one – the European Parliament – is also the weakest,
because it has almost no power to initiate legislation; and voter
turnout at parliamentary elections is low and has been declining for
years. An upper house – the Council of the European Union –
contains one minister from each member state. The most powerful
institutions are wholly unelected. The European Court of Justice
contains one judge from each member state; its judgements override
those of member state courts where they conflict, and it’s
gradually extending its jurisdiction beyond European legislation and
into the domestic law of member states. The most powerful
institution is the EU’s executive, the European Commission. It
consists of one appointed commissioner per member state; it has
almost exclusive power to initiate legislation within the EU’s
areas of competence, so it routinely administers legislation that it
has drafted itself. As an unelected body that combines legislative
and administrative power, it amounts to perhaps the most powerful
bureaucracy in the Western world.

In
the early years, the member states were protected by a unanimity
rule, so that they could veto any legislation they didn’t approve
of. But as the number of member states grew the unanimity rule
threatened to produce permanent deadlock. To overcome this risk, in
1986 qualified majority voting was introduced in certain areas, where
member states therefore formally lost sovereignty. It was this
change that prompted Margaret Thatcher – when she fully realised
what she’d sign up to – to refer to the EU as a ‘super-state’
that could eventually undo the reforms her governments had introduced
in the UK.

The
EU system of government is clearly remote from the Westminster
tradition of responsible government. Instead, EU government is highly
centralised, dirigiste and only weakly and indirectly accountable. It
reflects a continental European style of high-handed and heavy-handed
government that in modern times was perfected by Napoleon and
Bismarck, but with a big difference: as far as possible it operates
invisibly. Its institutions are located in highly visible premises
in three European cities – Brussels, Strasbourg and Luxembourg –
but elsewhere it has very little physical presence. Its decisions
are implemented by and through the governments of the member states
in the hope that they look like decisions of those member states.
The EU is perfectly aware that its lack of accountability poses a
legitimacy problem in a continent where nation states still enjoy the
allegiance of their populations. You could say that the EU free
rides on the legitimacy of the member states. But EU rulings still
have to be treated somewhat differently from domestic legislation.
Typically, they arrive without warning and without any public debate
about them beforehand (there’s nothing like an organised opposition
within the EU offering alternative policies) and precious little
debate afterwards either, since they can’t be changed, only
rubber-stamped. Yet the system does work quite well. Some major
policies are known to emanate from the EU, such as freedom of
movement for workers throughout the EU; sometimes the EU advertises
its policies, like infrastructure investment. But probably most of
the legislation initiated by the EU is assumed to be domestic in
origin; in the UK, at least, out of embarrassment, politicians
usually try to avoid admitting when they are in reality carrying out
EU instructions.

In
1999 an employee of the European Union helpfully summarised the EU’s
modus operandi thus:

We
decide on something, leave it lying around and wait and see what
happens. If no one kicks up a fuss, because most people don’t
understand what has been decided, we continue step by step until
there is no turning back.

You
might suspect that the author of that was some obscure but courageous
whistleblowing bureaucrat letting the cat out of the bag. In fact it
was none other than Jean-Claude Juncker, now the President of the
European Commission and the most powerful eurocrat of all.

The
second big fact about the European Union is that there is no settled
division of powers between the EU and the member states. Instead,
the EU is a project to achieve what the Treaty of Rome calls ‘ever
closer union among the peoples of Europe’. This ‘ever closer
union’ is achieved mainly by periodic treaties that transfer
additional powers from the member states to the European Union.
There’s a pervasive assumption that all remaining powers exercised
by the member states will eventually be transferred to the EU, and
the member states reduced to administrative units. Everything the EU
does should be interpreted in this light. It’s impossible to
exaggerate its determination to overcome all obstacles to ‘ever
closer union’.

Early
in the present century the EU did draft a document that consolidated
the existing treaties in a so-called constitution and extended
qualified majority voting into new areas. It needed to be ratified
by all the member states. Some governments put it to popular
referendum, and in 2005 in two countries – France and the
Netherlands – it was rejected. The response of the EU establishment
was, I think, a watershed in the history of the EU. It showed that
the EU would continue to construct its super-state if necessary in
open defiance of public opinion. Comments made at the time by leading
members of the EU establishment were strikingly cynical and
revealing. Jean-Claude Juncker – him again – said before the
French referendum, ‘If it’s a Yes, we will say “on we go”,
and if it’s a No we will say “we continue”’. In the end the
so-called constitution was redrafted
in the form of a regular treaty, called the Treaty of Lisbon, so that
most member states could adopt through ordinary legislation, avoiding
referendums. The former French president Giscard d’Estaing, one of
the architects of the Treaty of Lisbon, explained exactly what the EU
was doing:

The
texts would be sent to national parliaments, which would vote
separately. Thus public opinion would be led to adopt, without
knowing it, the provisions that we dare not present directly.

Perhaps
it’s because these Eurocrats are unelected that they speak with
such casual and cynical candour. They certainly get away with it.

The
third big fact about the EU is its conception of what ‘ever closer
union’ looks like. In a word, it looks like uniformity. The goal
of the project is to eliminate – perhaps ‘deny’ is a better
word – as many as possible of the differences between the member
states and to cultivate an overarching European identity that
eventually eclipses the national identities. So not so much E
pluribus unum,
‘Out of many, one’, which was once the motto of the United
States, but ‘Instead of many, one’. The words that are always on
the lips of EU officials and in their documents are ‘convergence’,
‘integration’ and ‘harmonisation’. We might call it the
ideology of ‘singleness’, as suggested by the EU’s so-called
‘single market’ and ‘single currency’. But that
innocent-sounding word contains the clue to the deep unresolved
problems of the European Union.

To
take ‘single market’ first, this is often taken to mean the same
as ‘free market’. There is of course free movement of goods,
services, capital and people between the member states. But the
single market is much more than that. For a start, it’s a customs
union: it is a protectionist bloc designed to artificially increase
trade within the EU by diverting it from the word at large. It’s
true that the average tariff is low, around four or five per cent.
But European agriculture is protected by an average tariff of over 20
per cent.

As
well, the single market is a common regulatory area. In the EU
economic standards and conditions are increasingly framed centrally
and imposed uniformly, and on entire economies, not just their export
sectors: this is really what the ‘single market’ is about. All
regulation reduces competition, for better or worse, but the single
market does so in two particular ways. First, the single market
aspires to suppress or eliminate competition between national
standards and tax levels. Where such competition exists, the EU
denounces it as ‘unfair’ – as if only competition between
agents operating under identical conditions is ‘fair’. A good
example is Ireland’s unusually low corporate tax rate of 12.5 per
cent, which has helped the country to recover from the euro crisis
and bailout in 2010. But the European Commission is less concerned
with Ireland’s recovery than with its long-term goal of
‘harmonising’ tax rates throughout the EU, and so it periodically
accuses Ireland of practising ‘unfair competition’. In
conventional free trade associations the member countries retain
sovereignty over their regulations and tax levels, and so are free to
recognise one another’s regulations or to harmonise regulations and
taxes with those of other members, as they see fit; they can learn
from the effects of their own and other countries’ regulations (or
absence of regulations). But that type of diversity is in principle
is ruled out by the EU’s single market, and the European Commission
works tirelessly to eliminate it.

Second,
uniform standards can protect richer member states from competition
from poorer ones. EU legislation typically imposes costly
environmental, social and labour-market regulations that the richer
north European countries can afford more easily than the poorer
countries of southern and eastern Europe. The EU partly offsets this
effect with grants to poor regions for infrastructure investment; as
well, unemployment in poorer countries is partly mitigated by
emigration to richer countries. But southern and eastern European
countries would surely develop more securely and with less disruption
if they were free to tailor their economic standards to their own
needs and choices.

It’s
not that surprising, therefore, that the EU has a relatively stagnant
economy; the great post-war boom that so attracted the British in the
early 1970s started to peter out in the late 1970s. It’s telling
that the EU’s trade with the rest of the world is growing faster
than its internal trade, despite the trade-diverting effects of its
tariff wall. So far Malta and Britain are the only EU counties that
trade more with the rest of the world than with the rest of the EU,
but the other countries are heading in the same direction.
Economically, Europe needs to scrap its tariff wall and integrate
globally; but the project of ever closer union within Europe has so
far always been given priority over economic growth.

Europe’s
Disastrous Single Currency

Nothing
illustrates the tension between ever closer union and the need for
economic reform than the euro, the EU’s biggest institutional
achievement. The euro is often called Europe’s ‘single
currency’, meaning that it is the one and only legal tender in the
19 countries that have adopted it. It didn’t have to be. In the
1990s the British advocated an EU currency that would circulate
freely alongside the national currencies of the member states – so
a common currency, not a single currency. The idea went nowhere, even
though the British scheme would have allowed a European currency to
evolve spontaneously, and perhaps eventually become de facto the
single European currency, but without the distortions and tensions
that the euro has introduced. But such a bottom-up, devolved
approach would be anathema to the centralism of the EU.

Indeed,
the story of the euro shows how powerful groupthink and fashion among
governing elites can be in defiance of the clearest argument and
evidence. Many economists argued that a single currency wouldn’t
work if it embraced both the richer north and the poorer south of
Europe; a single exchange rate would prove to be too low for the rich
countries and too high for the poorer ones, distorting trade patterns
(and Germany’s current account surplus is indeed an enormous eight
per cent of GDP). As well, if the Eurozone countries were at
different phases of the trade cycle, a single interest rate would be
pro-cyclical, that is, too low for booming economies and too high for
those in recession, and so would pull Europe’s economies apart, not
push them together. Abundant evidence backing up these warnings was
available from German reunification in 1990, when former East
Germany’s old currency was replaced, virtually overnight, by West
Germany’s Deutschemark. It was exchanged at a rate of one east
mark for one Deutschemark,
when the market rate was five or six east marks for one
Deutschemark.
This inflicted an excessively high exchange rate on the relatively
poor eastern area of Germany, which consequently became trapped in a
deep recession for years. The subsequent huge subsidies from West to
East and mass migration from East to West for years generated popular
disillusionment with reunification.

Germany
at least tried to delay introducing the euro until European fiscal
and political union had been achieved. But the French, cynical and
manipulative as ever in their EU policies, wanted to introduce
monetary union quickly precisely in order to hasten the fiscal and
political union needed to make the euro work; and they won the
argument. So the euro was born in 1999, run by a new supranational
institution, the European Central Bank.

To
give the euro credibility, each eurozone state had to agree to adopt
German standards of fiscal discipline by observing strict limits on
budget deficits and national debts – the so-called ‘convergence
criteria’ – on pain of being fined by the European Central Bank.
The idea was that if the euro states ran budgets as tight as
Germany’s, they would gradually achieve German levels of stability
and prosperity. But in practice the fiscal limits were breached
almost at once by Germany and France – which then rewrote the rules
to avoid being fined. Other countries got the message, launched
spending sprees, and none was ever fined. That set up the Eurozone to
be overwhelmed by the global financial crisis of 2008. Five
countries were bailed out – Greece, Spain, Ireland, Portugal and
Cyprus. Normally, when countries are bailed out by the IMF they have
to balance their budgets, but also have to devalue their currencies
to give their economies a compensating boost. But in the Eurozone
that’s impossible. The entire adjustment had to be borne by fiscal
policy, and so the bailed out countries went into recession, which
actually had the effect of increasing their debt burdens.

Most
of the bailed out countries are slowly recovering, having enacted
some necessary domestic reforms to offset the spending cuts and tax
rises. The one country which may not recover is Greece. In 2011
Greece’s condition looked so dire – the national debt so big that
it could never be repaid – that it was widely expected to fall out
of the Eurozone. Then followed an extraordinary episode that showed
just how committed the EU is to the euro and how far it was prepared
to go to defend it. The government of George Papandreou proposed to
put the terms of the bailout to popular referendum, expecting them to
be rejected. French President Sarkozy and German Chancellor Merkel
then publicly informed the Greek government that the referendum could
go ahead only if the question was changed to whether Greece should
remain in the Eurozone. They knew that a referendum on that question
was likely to pass (unlike the proposed referendum on the bailout
terms), but they also knew that Papandreou’s domestic position was
so weak that their intervention would topple him. Papandreou duly
resigned, the referendum was cancelled, and a new government accepted
the terms of the bailout.

What
was so egregious about the French and German intervention is that it
had no legal basis whatever, for all that the EU claims to be devoted
to the rule of law. It reflected purely the power of the purse, given
that France and Germany would finance the lion’s share of the
bailout, and given that Greece felt too small and weak to cut itself
loose from the Eurozone, let alone the EU itself. The Greek press
ran cartoons showing Chancellor Merkel in Nazi uniform, and a veteran
Greek politician argued that the German bailout money should be
treated as compensation for the German occupation and plunder of
Greece during World War II. Meanwhile a joke circulated in Germany,
like those rather bitterly ironic jokes that used to circulate in the
communist bloc and get straight to the truth.

The
Greek, the Spaniard and the Irishman went into a bar for a drink. Who
paid? Answer: the German.

So
the euro, intended as it was to bring the countries of Europe
together in a shared project and destiny, had ended up provoking
division between them.

Since
then Greece has slowly succumbed to indirect rule by the European
Union. Its economy has shrunk by over a quarter, and youth
unemployment exceeds 50 per cent. Many of the most skilled young
people have emigrated. In 2014 a left-wing party, Syriza, came to
power on an anti-austerity platform. In 2015 it held a popular
referendum, in which the people rejected the terms of the country’s
third bailout by the EU. This time the European Union didn’t try to
stop the referendum but simply ignored the outcome and imposed the
bailout terms anyway.

I’ve
not spoken to any supporter of the EU who can convincingly defend its
treatment of Greece. The official EU line is that Greece needs to
reform itself, and that’s true: it’s a deeply corrupt and
misgoverned country, and in the long run liberal economic reform is
indeed the only reliable path to prosperity. As well, the Greeks can
now too easily blame the EU for problems that are really of their own
making. Yet the short-term political and economic cost of reform is
greatly magnified because Greece can’t devalue its currency so as
to boost its exports. The IMF is pressing for Greece to be allowed
to write off much of its national debt (which is approaching 200 per
cent of its GDP) but the EU has ruled that out, because the German
government can’t afford to give up pretending to its taxpayers that
the Greek loans will be repaid: the moment it admitted that Germany
was in fact the EU’s milch cow, it would face a taxpayers’
revolt. But nor can the EU sanction even a temporary departure of
Greece from the Eurozone to help it recover, since as soon as that
happened other bailed out member states could demand the same relief,
and the single currency could rapidly disintegrate.

Ever
Closer Union?

Instead,
the EU is responding to the euro crisis as it does to every crisis:
by planning yet another drive to ‘ever closer union’. In his
State of the Union Address delivered on 13 September, Mr Juncker
announced plans for a common Labour Authority, a Banking Union, a
European Social Standards Union, and a European Defence Union. He
also proposed qualified majority voting on harmonised consumption
taxes and corporate taxes (so Ireland could at last be made to
sacrifice its competitive low corporate tax rate), and even funding
for transnational political parties to contest European parliamentary
elections. To bolster the monetary union, Juncker proposed a new
European Minister of Economy and Finance, in effect a fiscal union.
He did not refer to the deep division between France and Germany on
how it should operate. The French envisage pooling the Eurozone’s
national debts in a transfer union, so that money would flow from
richer to poorer states as automatically as it does from richer to
poorer regions within individual states. Germany opposes automatic
redistribution among member states because the German public would
never consent to Germany becoming the permanent milch cow of the EU,
as it surely would be in any transfer union. Instead, it proposes
that the new ministry should rigorously enforce the original
‘convergence criteria’ of the euro, that is, impose budget
balance on every member state. That might remove the need for
transfers between the member states, but it promises only permanent
depression for bankrupt countries like Greece since they can’t
devalue their currencies.

Both
the French and the German proposals for fiscal union would mean all
member states agreeing to transfer budgetary powers to the EU and
harmonising their tax and welfare policies. But such unanimous
consent is unlikely to be forthcoming. Yet unless something changes
the distortions generated by the euro are likely to produce another
crisis when the economy next turns down. Commentators think the weak
link is actually Italy. Unlike Greece, Italy is too big to be bailed
out. Its national debt is well over 100 per cent of its GDP and its
banks are sitting precariously on bad debts worth about 20 per cent
of Italy’s GDP – a figure that isn’t falling because Italy’s
economy virtually stopped growing when it adopted the euro in 1999.
If Italy did go bust it would likely simply fall out of the euro,
risking the survival of the entire Eurozone.

It’s
hardly surprising that Europeans are increasingly sceptical about the
European Union. Opinion polls show a pattern of sentiment similar to
that which the referendum revealed in the UK: elites strongly favour
the EU, but popular majorities in most countries see little benefit
from it and favour the return of some powers to member states.
There’s no popular demand at all for ‘ever closer union’. True,
in no country do polls show a majority in favour of leaving the EU,
but Eurosceptic political parties do now exist in most countries, and
have gained ground in recent elections in Germany, Austria and the
Czech Republic.

It’s
pretty clear that Europe needs a new constitutional settlement.
Europe’s core national identities have resisted the EU’s attempt
to replace them with a wholesale European identity, even though
Europeans generally do also subscribe to a European identity. A
reformed European Union would therefore ideally move away from being
a super-state in the making and seek to create unity out of that
diversity – just as the Australian and other modern federations
preserve the identities and constitutions of their constituent parts.
Any such reform is most likely to result from a combination of
events and popular pressure that starts a piecemeal return of powers
to the member states. Some decades ago the British advocated that
member states should decide for themselves which areas and levels of
EU integration to adopt (and Britain and a few other states have
indeed opted out of the euro and some other EU arrangements). They
thought that that was the only way to keep the EU together as it
expanded its membership to embrace nearly the whole continent.
They’ve been proved right as the EU’s latest drive for further
integration has overreached: its proposed fiscal union seems beyond
realisation, and even if it were realised it could turn out to be yet
another source of antagonism between member states.

But,
as we’ve seen, there’s no prospect of the present leadership of
the EU entertaining any orderly retreat from ever closer union. Here
I can usefully quote yet again (but for the last time) Jean-Claude
Juncker: ‘Borders are the worst invention ever made by
politicians.’ He said this in August 2016, as if fanatically
determined not to learn anything from the Brexit vote. Juncker’s
visceral loathing of national borders is typical of his generation of
Eurocrats, whose outlook was formed by World War II. This makes them
ill-equipped to manage either the existing pressures for reform in
the EU or the fall-out from any future euro crisis, which is
therefore that much more likely to be chaotic and unpredictable. I
therefore can’t be optimistic about the future of the existing
European Union. But I also think that all the elements of a
successful European association exist that a future generation of
European politicians might one day bring together. Any such
politicians would most likely come largely from southern Europe,
which has endured the severe recessions inflicted by sustaining the
single currency, or from eastern Europe, where countries have
recently regained their national sovereignty after the collapse of
the Soviet empire and are particularly keen to retain it.
Back
in the 1960s, France’s President de Gaulle for a time resisted the
emerging European super-state and promoted a vision of what he called
Europe
des patries,
a Europe of nation states. If that vision were to be revived and to
gain currency, it would help Europe to start its necessary retreat
from the dead end of ever closer union towards a genuinely
accountable and legitimate international association.

Concluding
Thoughts

A
final observation. The European Union has failed to generate a
European identity that would legitimise its drive to ever closer
union, but it won’t or can’t renounce that drive. As a result
it’s come to look like a power system devoted to
self-aggrandisement and like a vehicle for the self-enrichment of
career bureaucrats, for which it provides abundant opportunities, as
international organisations tend to do; indeed, corruption is so
endemic in the EU that it’s more than 20 years since the auditors
fully signed off the EU’s books. Perhaps that’s why, when a
serious and urgent problem arises in Europe, the EU can suddenly seem
weak, cumbersome, and leaderless, while the member states come into
their own. When in 2015 the flow of migrants from the Middle East and
Africa surged, Germany’s Chancellor Merkel invited them all to come
and live in Germany. She didn’t consult her EU partners and just
ignored the existing EU arrangement whereby migrants seek asylum in
the first country that receives them. When the public reaction set
in, the EU did arrange with Turkey to stop the flow of migrants into
Greece. But it failed to stop the flow into Italy, which has been
left to deal with it alone as its EU neighbours, France and Austria,
have closed their borders to the migrants. Such a failure makes many
Italians wonder what the European Union is for; and indeed it
suggests that the ideal of ‘ever closer union’ is at bottom just
a conceit or a fantasy entertained by Europe’s elites and no one
else. Surely it’s time for Italy and its neighbours to learn to
deal directly with one another to solve what is after all a common
problem, and in so doing to start to turn the EU into the association
of independent states it should always have been.